How to compute food cost per drink (with a latte example)

Your sales report tells you how much came in. It doesn’t tell you how much of that you kept. To know that, you need the food cost of each drink: what the beans, milk, syrup and cup inside it cost you. It takes about ten minutes per drink the first time, and it changes how you price your menu.

Step 1: List everything that goes into one drink

Write down every ingredient in one serving, in the units you measure it in: grams for beans and powders, millilitres for milk and syrups, pieces for cups, lids and straws. Include the packaging. A cup, lid and sleeve can cost as much as the milk.

Step 2: Work out the cost per gram, millilitre or piece

Divide what you paid by how much you got:

• Beans: ₱1,200 for 1,000 g = ₱1.20 per gram
• Fresh milk: ₱95 for 1,000 ml = ₱0.095 per millilitre
• Cups and lids: ₱650 for 100 = ₱6.50 each

Use the price you actually paid, including delivery if your supplier charges for it.

Step 3: Multiply by how much one drink uses

18 g of beans at ₱1.20 is ₱21.60. 200 ml of milk at ₱0.095 is ₱19.00. Add the cup and lid, and you have the cost of one latte.

Worked example: a 12 oz latte

The latte costs ₱47.10 to make and sells for ₱140. But if your prices include 12% VAT, ₱15 of that belongs to the government, not to you. Work out your margin on the price without VAT: ₱125. That leaves ₱77.90 profit, a gross margin of 62.3%, so the ingredients take 37.7% of what you keep.

What food cost should you aim for?

There’s no single right number. Many cafés aim for drink costs of roughly a quarter to a third of the price, because the rest has to pay for rent, wages, electricity and your own salary. Compare drinks against each other: if most of your menu sits near 30% and one drink is at 50%, that one needs a new price or a new recipe.

Keep the numbers current

Ingredient prices change. If you have 2 kg of beans that cost ₱1,100 a kilo and receive 3 kg more at ₱1,300, your beans now cost an average of ₱1,220 a kilo ((2 × 1,100 + 3 × 1,300) ÷ 5). That’s called a weighted average cost, and it’s the fairest price to use for the next drinks you sell. Redo the sum whenever a delivery comes in at a new price, or let your POS do it.

Common mistakes

• Forgetting packaging. Cups, lids, straws, sleeves and bags are part of every takeaway order.
• Computing margin on the VAT-inclusive price. It counts the VAT as if you kept it, so the latte above would show a 66.4% margin instead of 62.3%. See how to take the VAT out of a price.
• Forgetting add-ons. An extra shot or oat milk changes the cost. Cost each option as well as the base drink.
• Never updating. A recipe costed last year is probably wrong today.